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What You Should Know About Equity Crowdfunding

What You Should Know About Equity Crowdfunding

Raising capitals for startups and other related projects tend to take place through different methods, and the most popular one from the lot is equity crowdfunding or investment crowdfunding. As a unique method of offering the company’s securities to several potential investors, the method opens up a platform through which companies can witness their goals become true. But that alone cannot sum up this aspect of investment because there is more that you have to know about.


To make matters clear, you need to know that equity crowdfunding is entirely different from other methods of funding. The model or the method opens the door towards a conventional form of raising capital that also offers financial securities to investors. Due to that, you cannot compare it with donation crowdfunding or other similar methods. To carry these aspects forward, individuals use several platforms like StartEngine or Wefunder.

By doing so, equity crowdfunding aims to get hold of a broader group of investors rather than settling for a small group. The idea is to raise capital, and that is precisely what they want to do.


The Benefits

Equity crowdfunding does come with a number of benefits, and it is highly important that we know about the same. The ease through which it lets you access capital is one such benefit that helps startups realize their potential. Apart from that, equity crowdfunding also applies less pressure on the management because it does not result in dilution of power. Moreover, the involvement of large investors also allows power to be around the group rather than being shared by an individual.

Due to all that, equity crowdfunding does open the door towards essential benefits that also provide a gateway for you to meet your objectives. But there is no form of investment that does not come without risks.

The Risks

Yes, that’s right. Equity crowdfunding does have risks of its own, and you need to be aware of the same. The high risk of failure and low liquidity are notable risks that people often fail to look at. While low liquidity has a lot to do with equity crowdfunding platforms, the risk of failure comes from the general idea of a startup. A startup involves many risks, and it is a common ingredient that you either tackle or fail to tackle.

Apart from those risks, the platform has also shown signs of fraud that goes ahead to be another form of risk. Due to all that, making investments and seeking the same needs to be carried forward with a lot of caution. In this manner, you will be aware of the risks and the many methods to avoid the same.

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